Gone With the Wind 
The Last Pickens Show 
There Will Be Boone
The most famous wildcatter in Texas history is spending $58 million of his own money to promote the Pickens Plan, which proposes massive wind farms (which he’s already building), more reliance on natural gas (which he has a huge stake in), and ways to combat global warming (which loyal Republicans aren’t supposed to believe is real) to break America’s addiction to foreign oil. But does the 80-year-old have the energy to save the world?
Garry says: I am dissappointed that you have not included the wonderful pictures of T. Boone, his wife, and the lovely interior shots of his home. I am visiting friends out-of-state and was bragging on your magazine. I pulled up your website hoping to show my aunt the pictures, but was somewhat dumbfounded that the online article didn't include all of the photos. Why? It seems such a shame not to enhance the online article when you already have the photos. (December 10th, 2008 at 10:27am)
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He was one of the first barbarians at the gate, his raids on Gulf Oil, Phillips Petroleum, Cities Services, and Unocal so stunning that he landed on the front pages of hundreds of newspapers, as well as on the covers of such magazines as Time and Fortune (and Texas Monthly, in 1982). Although he never acquired any of the companies he targeted, he brought almost all of them to their knees, forcing them to merge with other companies just to keep him away. As a result, he did, as promised, increase the value of the stock of those companies, reaping millions for their shareholders and millions more for Mesa. (From 1982 to 1985, Mesa made at least $800 million off its takeover battles.) To prove that he really was the kind of CEO who put his shareholders first, he also issued large distributions to Mesa’s own shareholders.
He then used much of Mesa’s earnings to purchase huge reserves of natural gas because he believed that the price was about to go up. It was a spectacular miscalculation. Gas prices declined, Mesa became saddled with $1.2 billion in debt, and the company itself became a target of its own corporate raider. Incredibly enough, the raider was David Batchelder, a former Mesa executive and a Pickens takeover protégé.
Boone ultimately blocked Batchelder’s move by arranging for former Fort Worth financier Richard Rainwater (who once oversaw the Bass brothers’ financial holdings) to invest as much as $265 million on preferential terms that essentially gave Rainwater control of Mesa. Although Rainwater initially said he wanted Boone to run the company, a plan was soon formed to push him out. Boone told me that in May 1996, Rainwater invited him to his estate in Santa Barbara, California, where he was then sent off to have iced tea with Rainwater’s wife, Darla Moore, who had once been a feared executive at Chemical Bank. According to Boone, Moore promptly informed him that he “hadn’t kept up” with the times in the oil and gas industry and that he should leave Mesa.
Boone was then 68 years old. “It was a devastating moment for him,” recalled Stillwell. “Darla and Richard didn’t treat him well, and Darla went so far as to insult him. I’ll never forget, after that meeting with Darla, he looked at me and quietly said, ‘They don’t want me.’”
To add to his problems, his marriage to Bea, whom he once described as “the perfect deal,” was going south. (Boone had already been divorced before.) According to word on the street, he spent $10 million in legal fees fighting Bea in court. When they finally settled, he was left with about $34 million in cash and assets—peanuts for someone like him.
In September 1996, a mere four months after his unceremonious exit from Mesa, he formed BP Capital, which consisted of just Boone and five employees, all of whom worked out of a modest leased office that contained used furniture. He drove to a government building in North Dallas to take the National Futures Association examination. A young man walked up to him and asked what he was doing there. “Hell, trying to get by like everyone else,” Boone told him.
After failing twice, he finally passed the test, and he went looking for investors for his hedge fund. He raised about $40 million—$10 million from his own pocket, with most of the rest coming from rich old pals like Fayez Sarofim, of Houston, and Harold Simmons, of Dallas. But almost immediately, Boone made another bad call, going short on natural gas contracts, betting that prices would drop, which they did not. From July to November 1997, the fund was losing at least $1 million a month—in November it lost $13.3 million—and by January 1999, it was down to only $2.7 million. “I was scratching a poor man’s ass,” Boone said.
People who were around Boone during those days say he was definitely off his game. His sense of humor was gone, and he snapped at his underlings in the office. When I told him about seeing him at Bob’s Steak and Chop House—the truth was that a lot of Dallas people dropped in at Bob’s just to get a look at him—he said, “Yeah, it wasn’t my finest hour. Most nights, I went with my divorce attorney, and I didn’t have much of an appetite. I ended up with about twenty doggie bags of steaks in my freezer.”
At one point, Boone’s lawyer worried that he was suffering from clinical depression. Boone said that he met with a psychiatrist, whom he described as “one of those intellectuals,” and took antidepressants for about a month. “But I didn’t have any desire to slow down and take a vacation like some people were telling me to do. I still wanted to run with the big dogs. And if you’re going to run with the big dogs, you’ve got to get out from underneath the porch.”
He did make a couple of attempts at being the old barbarian. On one occasion, he bought stock in a small publicly held oil company in Tulsa and paid a visit to the chief executive officer. But the CEO didn’t even let him come through the main reception area, sending him instead into an office through a side door. Boone gave him his standard spiel—“I said, ‘I’ve got a lot of money invested with you, and I think the company needs to change for the good of the shareholders’”—and the executive promptly escorted Boone right out of the office. He knew Boone didn’t have the financial backing to mount a takeover.
“After that, did you consider giving up?” I asked.
Boone gave me a look, his eyes narrowing. “You think the phrase ‘giving up’ is in my vocabulary?”
In early 2000, Boone made his make-or-break gamble, telling his brokers to take almost all the money they had left and buy long on natural gas. The price, he said, had to be going up. This time, he was right: By November, natural gas had jumped from $2 to $4.50 per thousand cubic feet, and a month later it was at $10.10. In a single year, the hedge fund was up $252 million, a gain of 9,905 percent before fees. Boone then reversed course in early 2001, taking his position from long to short, right before the price of natural gas began to plummet, and in 2002, he just as quickly went back to buying long, right before a tropical storm and a hurricane shut down much of the offshore natural gas production and sent prices soaring once again. He was still buying long in early 2003, when massive winter storms hit the United States, causing another spike in prices.
Meanwhile, he was making similar moves with his oil trading. In December 2003, when Wall Street experts were claiming oil prices had topped out after having gone up 50 percent in the previous six months, from $20 to $30 a barrel, Boone ordered his brokers to buy long on every contract they could find. He ordered them to continue doing so in October 2004, when oil hit $50 a barrel, and in 2005 he still had them buying long, purchasing futures contracts as far out as ten years. At his daily meetings with his investment team, he insisted that the world had reached peak oil, meaning that the total production of oil could no longer keep up with the world’s demand. He said that OPEC’s claim about having plenty of extra reserves to handle the rocketing need for oil (especially from China and India) was absurd, and he was especially adamant that U.S. oil companies were unable to make up the difference. He said that Big Oil’s hopes of finding billions of barrels of oil offshore or in the Arctic National Wildlife Refuge was “their last kiss at the pig.” The price of oil, he said, was going to soar past $100 a barrel.
At the end of 2005, his hedge fund was up $1.3 billion, and a second BP Capital fund that invested in energy companies was up $532 million. At a Christmas luncheon, Boone passed out $50 million in bonus checks to his employees. Based on the returns he received from his own investments, along with the fees he made from managing the hedge fund, his income for 2005 was around $1.5 billion. (He paid the IRS $279 million in taxes.) Once again, Boone was being celebrated in the media, getting headlines like “Return of the Raider,” “The Resurrection of T. Boone Pickens,” and “Comeback Kid.” The New York Post ran an illustration of Boone dressed as a swami, accurately predicting the future price of oil.
“And your depression? Did your comeback help get rid of your depression?” I asked him.
“Depression?” Boone said, giving me the trademark grin. “Man, my depression was out the door and down the road.”
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